Renascience Inc.

The Company's principal sources of revenue are upfront payments, milestone payments, and royalty income under license agreements, all of which depend on the development progress and sales performance of pharmaceutical companies and others, resulting in discontinuous and irregular recognition timing. There is a risk that license agreements may not be concluded, that agreements may be concluded on terms below the assumed scale, or that licenses may be terminated after out-licensing. In response, the Company is working to expand the number of pipelines, finalize exit strategies at an early stage, and secure business development personnel.

If drug, medical device, or programmed medical device candidates fail to achieve favorable results in efficacy and safety evaluations, or fail to receive approval from regulatory authorities, there is a risk that the Company will be unable to recover the initially expected investment. Given the Company's size, the discontinuation of development for a single pipeline could have a severe impact on its business, results of operations, and financial condition. In response, the Company utilizes external experts (KOLs and consultants) and prior consultations with the PMDA to improve the precision of trial design.

Pharmaceutical-related laws and regulations, including GLP, GMP, and GCP, are subject to revision in response to technological advances and market trends, and there is a possibility that regulations may change significantly during the Company's lengthy development periods. If regulatory changes require modifications to the existing research and development framework, there is a risk of development delays, discontinuation, or unplanned additional funding needs. In response, the Company has established a framework to actively utilize prior consultations with the PMDA and others and to receive appropriate advice.

If numerous companies, including Western venture companies, enter the same disease area, this could lead to stagnation or discontinuation of subject enrollment in clinical trials, or termination of license agreements by out-licensing partners. There is also a risk that royalty income after launch could fall significantly short of expectations due to the launch of competing products. In response, the Company is working to diversify its pipeline and formulate differentiation strategies.

The Company recorded net losses continuously from the 18th fiscal year through the 25th fiscal year, and had a negative retained earnings balance as of the end of the 27th fiscal year. Because pharmaceutical development typically requires 20 years or more from basic research to launch, research and development expenses are incurred ahead of revenue, resulting in continuing operating losses and negative operating cash flow. The Company is pursuing fundraising through a third-party allotment program for new shares and share subscription rights implemented in FY2026 (ending March 2026), but depending on the progress of exercise of the share subscription rights, there is a possibility that sufficient funds may not be secured.

Toshio Miyata, the founder and Representative Director, Chairman and President, is the inventor of key patents relating to PAI-1 inhibitors, pyridoxamine, programmed medical devices, and others, and the Company's dependence on him in research and development and business activities is extremely high. If, for any reason, he becomes unable to continue his management and executive duties, this is expected to have a significant impact on the Company's business. There is currently no description of specific measures regarding the establishment of a succession framework.

The Company is a small organization consisting of 6 directors, 3 executive officers, 3 employees, and an average of 1 temporary employee, with operations heavily dependent on the head of each department. Competition for talent with domestic and overseas biotech ventures and pharmaceutical companies in the pharmaceutical development field is intense, and if personnel departures occur, business activities could be disrupted, potentially affecting results of operations and financial condition. In response, the Company has adopted an active hiring policy regardless of age or gender.

The foundation of the Company's business value lies in intellectual property rights such as patents, but advances in superior research and development by other companies or the failure of patent applications could affect the Company's business strategy and results of operations. Additionally, if patent infringement litigation with third parties arises, there is a risk that resolving it will require considerable effort, time, and cost. In response, the Company promotes early examination requests, extends the effective term through use patents, and has established a cooperative framework with retained attorneys and patent firms.

The Company settles license agreements with overseas companies primarily in foreign currency, but does not implement any particular foreign exchange hedging. If exchange rate fluctuations exceed expectations, the yen-denominated value of license income may fluctuate, potentially affecting results of operations. There is currently no description of specific measures regarding the introduction of hedging instruments.

As of the end of the fiscal year under review, the substantial voting rights held by Toshio Miyata, Representative Director, Chairman and President, and his relatives within the second degree of kinship reached 42.33%, giving them significant influence over decision-making at the general shareholders meeting. If the shareholding ratio of these shareholders decreases, it could affect the market price of the Company's shares and the exercise of voting rights, among other matters. While these shareholders have stated a policy of giving consideration to the interests of minority shareholders, the structural concentration risk continues.